Goodwill and Intangible Assets Accounting Policy

Goodwill totaled $633 million and $630 million at February 2, 2019 and February 3, 2018, respectively. In December 2017, Target acquired Shipt, Inc., an online same-day delivery service platform, for approximately $550 million. Target identified intangible assets of $40 million, primarily related to the tradename, customer relationships, and shopper lists, net tangible assets of $10 million, and goodwill of $500 million. The goodwill recorded primarily represents the value of significantly accelerating Target’s ability to provide same-day delivery services to the guests.

No impairments were recorded in 2018, 2017, or 2016 as a result of the annual goodwill impairment tests performed.

Intangible assets, net of accumulated amortization, totaled $66 million and $79 million as of February 2, 2019, and February 3, 2018, respectively, primarily related to trademarks and customer relationships. Target uses both accelerated and straight-line methods to amortize definite-lived intangible assets over 4 to 15 years. The weighted average life of intangible assets was 8 years at February 2, 2019. Amortization expense was $14 million, $14 million, and $13 million in 2018, 2017, and 2016, respectively, and is estimated to be less than $15 million annually through 2023.

Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.

Target Corp.’s intangible assets, net of accumulated amortization increased from 2017 to 2018 but then declined significantly from 2018 to 2019.

Goodwill

Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

Target Corp.’s goodwill increased from 2017 to 2018 and from 2018 to 2019.

Goodwill and intangible assets

Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.

Target Corp.’s goodwill and intangible assets increased from 2017 to 2018 but then slightly declined from 2018 to 2019.

An indicator of profitability, calculated as adjusted net income divided by revenue.

Target Corp.’s adjusted net profit margin improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.

Adjusted total asset turnover

An activity ratio calculated as total revenue divided by adjusted total assets.

Target Corp.’s adjusted total asset turnover improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted financial leverage

A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.

Target Corp.’s adjusted financial leverage increased from 2017 to 2018 and from 2018 to 2019.

Adjusted ROE

A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.

Target Corp.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.

Adjusted ROA

A profitability ratio calculated as adjusted net income divided by adjusted total assets.

Target Corp.’s adjusted ROA improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.

Target Corp.’s adjusted financial leverage increased from 2017 to 2018 and from 2018 to 2019.